Skip to content

CS Professional · Advanced Direct Tax Laws and Practice · Double Taxation Avoidance Agreement (DTAA)

Under Section 159(5) of the Income-tax Act, 2025, the charge of tax on a foreign company at a rate higher than that on a domestic company is treated how?

Section 159(5) says that taxing a foreign company at a higher rate than a domestic company is not to be regarded as a less favourable charge or levy of tax, so it is not treated as discrimination.

  1. AIt shall not be regarded as a less favourable charge or levy of tax on the foreign companyCorrect
  2. BIt is treated as discriminatory and must be reduced to the domestic rate
  3. CIt is permitted only if the foreign company has a branch in India
  4. DIt is treated as less favourable unless the agreement says otherwise

Explanation

Section 159(5)(a) states that charging a foreign company at a higher rate than a domestic company shall not be regarded as less favourable charge or levy of tax. Hence such a higher rate is not discriminatory for treaty purposes.

Did you get it right without looking?

One question tells you little. A timed set on Double Taxation Avoidance Agreement (DTAA) shows your real accuracy, how long you take and where you lose marks.

Practise Double Taxation Avoidance Agreement (DTAA)Free diagnostic mock

More Double Taxation Avoidance Agreement (DTAA) questions